TY - JOUR

T1 - Inter-household transfers

T2 - An empirical investigation of the income-transfer relationship with novel data from Burkina Faso

AU - Grimm, Michael

AU - Hartwig, Renate

AU - Reitmann, Ann Kristin

AU - Bocoum, Fadima Yaya

N1 - Funding Information: We thank two anonymous referees, seminar participants at the University of Kent as well as conference participants in Göttingen (GLAD 2018), Zurich (AEL 2018), Berlin (AEL Doctoral Workshop 2018), Munich (BGPE Doctoral Workshop 2019) and Oxford (CSAE 2019) for valuable comments. This paper is part of the Formal Insurance and Productive Effects Study (FIdES)—a collaborative research project of ASMADE, the Institute de Recherche en Sciences de la Santé (IRSS) in Ouagadougou, the University of Passau and the DIE in Bonn. Funding from the Rotterdam Global Health Initiative, the Bavarian Research Alliance (03124520) and the DIE is gratefully acknowledged. Renate Hartwig further acknowledges financial support from the F.R.S-FNRS, Mandate No. 6335. The funding sources had no involvement in any stage of this study. Funding Information: This paper is part of the Formal Insurance and Productive Effects Study (FIdES)—a collaborative research project of ASMADE, the Institute de Recherche en Sciences de la Santé (IRSS) in Ouagadougou, the University of Passau and the DIE in Bonn. Funding from the Rotterdam Global Health Initiative, the Bavarian Research Alliance (03124520) and the DIE is gratefully acknowledged. Renate Hartwig further acknowledges financial support from the F.R.S-FNRS, Mandate No. 6335. The funding sources had no involvement in any stage of this study.

PY - 2021/8

Y1 - 2021/8

N2 - Households in rural areas depend on informal transfers to meet subsistence needs and cope with shocks. Yet, to provide monetary support, formal safety nets are increasingly being introduced in developing countries. However, it remains unclear whether such social-protection policies will have the desired redistributive welfare effects. This article addresses this question from an ex ante perspective by analyzing the private-transfer response to changes in the income of rural recipients in Burkina Faso. We use novel dyadic household panel data from two periods that offers information on both recipient and sender incomes. This allows us to address the endogeneity concerns that other studies have thus far not been able to account for. Our hypothesis is that the transfer-income relationship is nonlinear and that transfer motives, and therefore also transfer responses, vary with the recipient's position within the income-distribution. Our findings support this view. We find a pronounced, negative private-transfer response among the poorest of the poor. This observation has important policy implications: those households that depend most on private transfers are the ones most likely affected by crowding-out effects. The negative relationship for the lowest income class is consistent with transfers being altruistic in nature. Furthermore, we observe, that with increasing income levels, transfers cease being altruistic suggesting that then exchange motives dominate. Yet, the observed transfer pattern is also indicative of an (informal) insurance role of private transfers. Rural households receive higher private transfers in response to negative shocks. These results can serve as a basis for the design of formal social-protection mechanisms in a context where informal redistribution still plays an important role.

AB - Households in rural areas depend on informal transfers to meet subsistence needs and cope with shocks. Yet, to provide monetary support, formal safety nets are increasingly being introduced in developing countries. However, it remains unclear whether such social-protection policies will have the desired redistributive welfare effects. This article addresses this question from an ex ante perspective by analyzing the private-transfer response to changes in the income of rural recipients in Burkina Faso. We use novel dyadic household panel data from two periods that offers information on both recipient and sender incomes. This allows us to address the endogeneity concerns that other studies have thus far not been able to account for. Our hypothesis is that the transfer-income relationship is nonlinear and that transfer motives, and therefore also transfer responses, vary with the recipient's position within the income-distribution. Our findings support this view. We find a pronounced, negative private-transfer response among the poorest of the poor. This observation has important policy implications: those households that depend most on private transfers are the ones most likely affected by crowding-out effects. The negative relationship for the lowest income class is consistent with transfers being altruistic in nature. Furthermore, we observe, that with increasing income levels, transfers cease being altruistic suggesting that then exchange motives dominate. Yet, the observed transfer pattern is also indicative of an (informal) insurance role of private transfers. Rural households receive higher private transfers in response to negative shocks. These results can serve as a basis for the design of formal social-protection mechanisms in a context where informal redistribution still plays an important role.

KW - Burkina Faso

KW - Crowding out

KW - Informal insurance

KW - Private transfers

KW - Sharing norms

UR - http://www.scopus.com/inward/record.url?scp=85104953828&partnerID=8YFLogxK

U2 - 10.1016/j.worlddev.2021.105486

DO - 10.1016/j.worlddev.2021.105486

M3 - Article

AN - SCOPUS:85104953828

VL - 144

JO - World Development

JF - World Development

SN - 0305-750X

M1 - 105486

ER -